Mr Major’s Written Question on the International Energy Agency – 17 June 1981

Below is the text of Mr Major’s Parliamentary written question on the International Energy Agency, published on 17th June 1981.

Mr. Major Asked the Secretary of State for Energy if he will make a statement about the meeting of the governing board of the International Energy Agency at ministerial level on 15 June.

Mr. David Howell The governing board of the International. Energy Agency met at ministerial level in Paris, on Monday, 15 June 1981, under the chairmanship of Senator The Honourable J. C. Carrick, Minister for National Development and Energy of Australia. I represented the United Kingdom.

The meeting considered short-term oil market questions, including the present situation and the development of measures for responding to any future disruptions and problems of structural change in the medium and longer term, including the question of energy pricing.

Ministers emphasised that, although the oil market at the moment was soft, it was essential to avoid complacency. The market was fragile and vulnerable to sharp changes as a result of a small incident. Continued market stability depended upon significant levels of supply being maintained from several major producing countries. Present stock levels, allowing for moderate seasonal stock-build this summer, should be adequate for the coming winter. But the situation should be kept under close scrutiny.

Ministers expressed the determination of their Governments that the agency should be equipped to respond to future supply disruptions in order to prevent them from again resulting in sharply increased prices and severe economic damage. They agreed that officials should continue, as a matter of urgency, to examine a range of measures to deal with such disruptions. The next step will be in-depth international consultations with the oil companies. It is hoped that the official governing board will take decisions in the second half of 1981.

Ministers agreed that it was essential to press ahead with the restructuring of the IEA energy economies, which was the only sure way of reducing dependence on imported oil. While there was general satisfaction at the progress which had been made, it was recognised that enhanced efforts were needed in a number of areas, particularly coal and nuclear power.

The importance of economic pricing of energy was recognised. Ministers agreed on the need to carry forward earlier IEA decisions on this subject. There was a widespread view that this further work should centre on the following elements:

(i) where world markets exist, now only for oil, consumer prices should reflect the world market price;

(ii) where world markets do not exist, consumer prices should normally reflect the cost of maintaining supply of the fuel concerned in the long term;

(iii) those subsidies of consumer prices and other interventions which discourage conservation, high levels of domestic production and substitution away from oil should be avoided and a thriving energy trade should be developed;

(iv) electricity tariffs should not prevent utilities from raising the revenues needed to provide capacity to meet future requirements;

(v) in considering tax positions proper weight should be given to energy policy objectives;

(vi) energy prices should be characterised by transparency so that consumers and producers can make economically efficient decisions.

The governing board at official level has been instructed to take up this question as a matter of urgency using the above elements and the discussion between ministers as a starting point.

I am placing a copy of the communiqué issued at the end of the meeting in the Library of the House.